How does the global financial crisis affect you

How Does the Global Financial Crisis Affect You?

With the stock markets in a slump, banks still restricting lending, and unemployment still at high levels, it clearly affects every one out there. Greece's economy is in dire straits, the U.S. is struggling to get back on its feet, and even countries like China are dealing with minimal growth. The global financial crisis does affect you, and you should know exactly how you are affected and what you can do to minimize the damage to your bottom line.

Banks and Interest Rates

In 2012, the Federal Reserve did report that it's getting easier to land auto, business, and commercial loans. This is good since rates are at incredible lows. Even credit card companies are lessening some of the restrictions they put in place. This doesn't mean they're approving everyone, but they are making it easier for some to borrow money or secure lines of credit.

The one area that is still tough to enter are mortgages. Much of the global crisis links to the real estate slump. Banks were lending too much money on homes that too expensive. When home values dropped, people owed more than their homes were worth, so they walked away on their mortgage loan. This created a tailspin of money banks were owed that would never be paid back. Banks have become very particular now when it comes to lending.

If you're looking for a home, there are a few things you can do to make sure you get the loan you need. First, don't buy a home that's bigger than your needs. Your mortgage should not eat up your entire monthly income. In fact, it shouldn't be more then 30 to 33% ideally. If you make $2,000 a month, don't buy a home where the mortgage will be more than $600 to $660 a month.

Make sure you have money saved for the down payment on your new home. To avoid private mortgage insurance (PMI), you want to be able to pay 20% of the home's value. On a $200,000 house, this means you need $40,000 available.

Pay Off Current Debt

Before you even shop for a home, take care of any credit issues. Take a look at your credit score. Most banks want to see credit scores that are near or over 800. If you're lower than that, you may still qualify, but you'll pay more thanks to higher interest rates. Work on getting your credit score raised by paying off credit cards and other debt first. If you have debt, consolidate that debt into low-interest loans. Pay those loans off completely before taking another step.

Shop around for the best loans. The Internet makes it easy to research rates, monthly payments, and find debt consolidation loans that meet your needs. In addition, Internet loans are approved within minutes, so you don't have to wait days or weeks for the financial help you need.